Welch, Katko Introduce Legislation to Help College Graduates Better Manage Student Loan Debt
WASHINGTON— Reps. Peter Welch (D-VT) and John Katko (R-NY) today introduced bipartisan legislation to help federal student loan borrowers make smarter loan choices and better position themselves during the repayment process. The bill is the latest Welch initiative to simplify the process of applying for and repaying federal student loans.
“Higher education is the gateway to America’s middle class,” Rep. Welch said. “Graduates should be focused on putting their degree to work and securing a job that will allow them to enter that middle class, rather than getting caught up in the maze of student loan repayment process. My bill will put at the borrower’s fingertips all the information needed to more quickly pay off student loan debt.”
“As we work to grow our economy, we must address the millions of Americans who struggle to attain financial security due to the weight put on them by student loan debt,” said Rep. John Katko. “I am proud to join Congressman Welch in introducing this legislation which ensures college graduates understand their pathways to repaying their student loans and ultimately, reaching financial stability. The more knowledge borrowers have, the more feasible and manageable repayment becomes and the more opportunities college graduates have to become greater contributors to our community.”
Current law requires entrance and exit financial counseling for college students borrowing to finance their education. Once completed, loan servicers are under no obligation to provide borrowers additional information on repayment options and forgiveness plans. As a result, students often fail to take advantage of financial strategies that would allow them to more quickly pay off their debt.
The Educating Student Loan Borrowers Act would require federal student loan servicers to disseminate information on an annual basis regarding the various repayment and forgiveness plans available to borrowers. The legislation will be referred to the House Committee on Education and the Workforce.
“Congressman Welch continues to lead the way on protections for student loan borrowers and this legislation will go a long way to simplify the overly complicated and poorly administered federal loan repayment programs,” said Scott Giles, president and CEO of Vermont Student Assistance Corporation. “Congressman Welch’s legislation is simple and straightforward: It asks the U.S. Department of Education to provide clarity and transparency to student loan borrowers so that they can make the appropriate financial decisions for their individual circumstances—and with the expectation of full trust and backing in our federal government.”
Total private and federal student loan debt exceeds $1.3 trillion – surpassing total credit card debt – and is shared by 42.4 million Americans. About 70 percent of students borrow money to finance higher education. Of those with federal government loans, one in six will not be able to pay them back on time.
The full text of the bill can be found here.